The recent decision by the Colorado Public Utilities Commission to reduce the amount Xcel Energy can charge its customers to pay for the utility’s pricey smart-grid experiment in Boulder is a victory for consumers.
There is little doubt in our minds that developing smart-grid systems is the way forward in modernizing the nation’s electrical grid. The systems, once fully implemented, have the potential to revolutionize how consumers use electricity and how utilities manage it. But having Xcel’s 1.1 million Colorado customers cover the bill for a costs that ended up being three times as much as first estimated would have been an unfair burden for ratepayers to bear.
To be sure, customers still will be footing a large part of Xcel’s costs in developing SmartGridCity, an effort to use computers to manage electrical distribution.
The PUC decision means two- thirds of the $44.5 million that Xcel spent on the project still will be included in the utility’s rate base. That’s no small chunk of change.
It’s also not the whole cost of the project. Back in 2008, the entire cost was estimated at $100 million, with Xcel’s share being some $15 million. The rest was to be paid by companies that were partners in the project.
It is the escalation in the utility’s share, which ratepayers were being asked to pay for, that is at issue.
We have been concerned for some time now about whether Xcel’s investments in the project were prudent. The company has contended in PUC filings that costs increased because of added expenses in laying fiber-optic cable and for software.
And we understand that cost estimates at the front end of a project can be off, especially in an effort that breaks new ground in both concept and scope. But asking ratepayers to foot a bill three times as large as originally pitched is a stretch, especially since watchdog groups and others have criticized the project for what they said was a lack of strong cost controls.
“It is an experiment, and Xcel can’t ask ratepayers to assume all the risk,” William Levis, director of the state Office of Consumer Counsel, told The Denver Post in August.
After the PUC decision, Levis said he was pleased with the result.
As part of the SmartGridCity project, Xcel installed some 24,000 smart meters in Boulder and put down a million feet of fiber-optic cable.
The SmartGridCity project has allowed the utility to monitor in real time the electrical system and detect outages and potential outages.
It also has given customers detailed information about their electrical usage so as to encourage conservation.
It has been an interesting project, and we do think that, eventually, some form of a smart-grid system will be widely adopted.
However, at this point, we’re glad Colorado’s Xcel customers will not be on the hook for the full cost of the utility’s experiment.
